Creative Real Estate Deals: Lease Option Success

 I want to share a story about a creative deal I’ve done in real estate — a lease option, also called lease-to-own. https://youtu.be/xXcSGJPHiNg 

The Situation

My neighbors recently inherited a small hobby farm, but the market for that type of land was tough, and traditional mortgages were hard to get. I showed them a strategy I had used a few years ago when selling one of my houses: a lease option deal.

 How the Lease Option Worked

1. Two Contracts
   
   

• Standard Lease: Required by New Brunswick law, three-year term, $1,300/month.
  
  

• Exclusive Option to Purchase: Separate contract, fixed purchase price, $3,000 non-refundable option premium applied toward the purchase price.
  
  

2. Rent Credit Toward Purchase
   
   

• The rent above market value ($1,300 vs $1,000) accrued as credit toward the eventual down payment.
  
  

3. Mortgage Qualification
   
   

• Structured to meet CMHC guidelines, allowing the tenant to use their payment history toward mortgage qualification.
  
  

The Result

• The tenants paid rent for almost three years, essentially covering my new house mortgage.
  
  

• When they exercised the option, the accumulated credits covered their down payment — no extra cash required.
  
  

• I made a profit, the tenants got a home they could afford, and they took great care of the property.
  
  

 Replication

My neighbors used the same strategy for the hobby farm. By following this model:

• They sold without listing through a real estate agent.
  
  

• They received monthly payments while the buyer improved the property.
  
  

• The property remained in their name until the deal fully paid out, reducing risk.
  
  

 Key Takeaways

• Lease options help buyers who cannot get traditional financing.
  
  

• Structuring the deal correctly protects the seller and incentivizes the buyer.
  
  

• It works best when the property is thinly traded or difficult to finance.
  
  

If you want to learn more about creative private investments, check out my book Invest Local — available on Amazon or as a PDF from DCBBooklist.com .

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